Deck 6: International Trade Theory

Question 1

Do you think the U..government should consider human rights when granting preferential trading rights to countries? What are the arguments for and against taking such a position?

Answer 1

Yes, the government should consider human rights when granting preferential trading rights to countries. Those who support considering human rights when deciding upon trade concessions argue that the benefits of trade can persuade a country to change how it treats their people. Those who oppose argue that tariffs based on human rights are counterproductive. If trade is allowed, then, it will improve the economic condition and the living standard of middle class. Richer societies with a middle class are more pro-democracy, and will therefore demand for a government that treats them better.

Question 2

Use the globalEDGE Resource Desk (http://globalEDGE.su.du/ResourceDesk/)to completethe following exercises:
Your company is considering exporting its pharmaceutical products to Japan, but management's current knowledge of the country's trade policies and barriers for this sector is limited.Conduct the appropriate level of research in a trade barriers database to identify any information on Japan's current standards and technical requirements for pharmaceutical products.Prepare an executive summary of your findings.

Answer 2

The quickest way to reach this information would be to search globalEDGE using the phrase "trade barriers database" at http://globaledge.msu.edu/ResourceDesk/. Once at the Market Access Database website, select "Trade Barriers Database." On the search option "Select Country," choose "Japan," and on the search option "Select Sector," choose "Pharmaceuticals." A series of reports are listed from which those with more general titles will provide adequate insight for the exercise. Search Phrase: "Trade Barriers Database" Resource Name: Market Access Database Website: http://mkaccdb.eu.int/ globalEDGE Category: "Research: Multi-Country"

Question 3

What is the impact of farm subsidies on the price of agricultural products in the United States, and on prices elsewhere?

Answer 3

The US government provides agricultural subsidies to farmers to reduce risks that disrupt production and demand. However, it has evolved over the years as a complex form affecting commodity prices in the US and international markets. The US government commenced agricultural subsidies to support farmers to stabilize their financial capacity and provide a consistent supply of farm products to the public. It assists American farmers against commodity price fluctuations. For instance, subsidies to cotton farmers created an opportunity for them to compete in the international market. It is estimated that the cost of cotton production is three time higher in the US than other countries. This cost is offset by agricultural subsidies. This has resulted in the over production of cotton in the US. As a result the supply of cotton became higher when compared to the demand resulting in a price drop. This price drop had an adverse effect among cotton producing countries which depend highly on agriculture for household income. For instance, a 40% reduction of cotton prices decreases the income level of people residing in country B by around 21%. This increases the population below the poverty line. Thus, US subsidies for agricultural commodities like cotton resulted in overproduction causing price decline. This adversely influenced economic crisis in low-income cotton producing countries.

Question 4

Whose interests should be the paramount concern of government trade policy - the interests of producers (businesses and their employees)or those of consumers?

Question 5

Use the globalEDGE Resource Desk (http://globalEDGE.su.du/ResourceDesk/)to completethe following exercises:
You work for a national chain of clothing stores that is considering importing textiles from India into the U..You want to determine whether the goods are subject to import quotas.Using information provided by the U..Customs and Border Protections , prepare a report highlighting the elements that determine whether a shipment is subject to this type of trade restriction.

Question 6

Who benefits from U..farm subsidies, who are the losers?

Question 7

Given the arguments relating to the new trade theory and strategic trade policy, what kind of trade policy should business be pressuring government to adopt?

Question 8

What would happen if the United States (and other countries)stopped paying subsidies to farmers to grow certain crops? Who would benefit, who would lose?

Question 9

You are an employee of an U..firm that produces personal computers in Thailand and then exports them to the U..and other countries for sale.The personal computers were originally produced in Thailand to take advantage of relatively low labor costs and a skilled workforce.Other possible locations considered at that time were Malaysia and Hong Kong.The U..government decides to impose punitive 100 percent ad valorem tariffs on imports of computers from Thailand to punish the country for administrative trade barriers that restrict U..exports to Thailand.How should your firm respond? What does this tell you about the use of targeted trade barriers?

Question 10

Reread the Management Focus feature on U..Magnesium Seeks Protection.Who gains most from the anti-dumping duties levied by the United States on imports of magnesium from China and Russia? Who are the losers? Are these duties in the best national interests of the United States?

Question 11

Why do you think that the U..government pays subsidies to farmers?